CDs vs. Stock Market

Deciding whether to buy CDs versus stocks is simply a matter of choosing whether you want to make a safe investment or take a risk. Some investors prefer to take in low returns in exchange for the guarantee that they will not lose money, while others would rather dive in and take a risk with the chance that they can make big bucks.

No one form of investment is better than the other–they’re just different. So the biggest decision you’ll have to make is choosing which is best for you.

CDs vs. Stocks

There are some definite benefits associated with buying Certificates of Deposits as opposed to stocks. Because you’re simply allowing the bank to borrow money in exchange for maturing interest, there is no real risk involved.

This form of investment offers the following additional benefits:

• Saving options: Unlike the stocks, which fluctuate and never provide guaranteed financial security, CDs let you know up-front how much they will be worth over a specified amount of time. This allows you the option of planning just how you can save your money.
• CDs are insured: Another benefit of taking this investment route is that your CD is FDIC insured up to $250,000, which means you know that at least some of your money will never be lost even if the financial market crashes.

Stocks over CDs

While CDs are hands-down the safest investment route to take of the two, some enjoy the risk and possibility of high returns associated with stocks. The best way to get the most out of this investment route is to understand how the market works:

• Long-term investments are best: Because stocks can fluctuate at the drop of a dime, it’s good to not to go into this type of investment hoping to make a quick buck in a short period of time. While this of course can and does occur, you have just as much a chance of losing it all if a company loses money.
• Invest wisely: It’s easy to follow the crowd when making investments, but it’s even more important to study the market for trends and long-term prices so that you avoid losing money unnecessarily.

Whether or not you decide to invest using CDs or stocks is a choice that may take some time. However, another option you have is to choose both forms of investment as a way to try for high returns with guaranteed money in your corner.

You might be interested in learning more about CDs vs money market accounts, another safe type of investment.